Bitcoin whales aren't responsible for volatility, research firm finds

The bitcoin whales are back. At least, that’s the conventional narrative that takes hold when the world’s largest cryptocurrency exhibits significant price swings, often over a short period.

However, new data from Chainalysis, a blockchain research firm that specializes in detecting fraud and money laundering, suggest this isn’t to be the case. In fact, it is quite the opposite.

Bitcoin whales, individuals that own a significant number of bitcoins, are responsible for cooling market volatility, not the source of it like many claim. “Intensive analysis of bitcoin’s 32 largest wallets, however, shows these fears to be overblown,” said Chainalysis in an Oct. 10 research note.

“Our data demonstrates that bitcoin whales are a diverse group, and only about a third of them are active traders. And while these trading whales certainly have the capability of executing transactions large enough to move the market, they have, on net, traded against the herd, buying on price declines.”

with a total value of more than $6.5 billion. Of these wallets, one-third are what Chainalysis describe as traders and the only group of whales that actively trade bitcoin. Miners, or early adopters, dormant wallets and criminals remain relatively inactive, the company’s analysis found.

Bitcoin insiders would describe these latter groups as HODLers, or those who hold onto their bitcoin no matter what’s happening to the price.

Furthermore, during the 2018 selloff, where the price of bitcoin shed more than 50% top-to-bottom and the total value of all cryptocurrencies fell from $828 billion to below $200 billion, traders, the most active group of bitcoin whales, were net buyers.

Data from bitinfocharts show this to be correct. The largest bitcoin wallet—address 16ftSEQ4ctQFDtVZiUBusQUjRrGhM3JYwe—last changed its holdings on Aug. 2, increasing by 10,000 bitcoins, and since February, the wallet has had six transactions, all purchases. As of Oct. 10, the wallet accounts for 0.97% of all bitcoins.

Yet, the anonymity of these oft-maligned bitcoin owners means cynics remain. On Sept 5, the price of bitcoin fell 14% in 48 hours and prompted online chat forums to see traffic balloon. Some claimed that a Silk Road-related wallet, the wallet holding the seized bitcoins of the now-defunct online black market, Others hypothesized it was the trustee wallet of Mt. Gox; the Tokyo-based cryptocurrency exchange that was hacked in 2014.

However, as intimidating these large stakeholders may be, Chainalysis data suggest these whales are rarely swinging for the fences. “Our research suggests that while bitcoin whales may be big and somewhat mysterious, they have less of an impact on market prices than many people believe,” the company said.

The price of a single bitcoin is changing hands at $6,515, down 53% on the year and more than 65% from its all-time high.